Default On Foreign Loans, Federal Government Panics


Azura Power and Seven Energy, the two key players in power and gas, have been unable to settle their December 2017 invoices regarding foreign loans that enjoy the World Bank partial risk guarantee (PRG) signed by the Federal Government of Nigeria (FGN).This revelation has set the federal government in panic mode,and the minister of finance, Kemi Adeosun writing to the Nigerian Bulk Electricity Trading (NBET) Plc to

 “urgently address the situation and settle the invoices.In a letter dated February 13, 2018, warned that if the invoices are not settled, “a default by the FGN in the Partial Risk Guarantees will not only significantly impact Nigeria’s borrowing ability in the International Capital Market but also increase our cost of borrowing”.

NBET is the federal government-owned guarantor that buys electricity from generating companies (GenCos) and resells to distribution companies (DisCos).She said in the light of these implications, “NBET and Niger Delta Power Holding Company (NDPHC) are requested to urgently address the situation and settle the December invoices for Azura and Seven Energy through (i) Collections from Distribution Companies; and (ii) Recourse to funds held by the two Corporations.”

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In August 2014, a federal government circular No. SGF/OP/1/S3/X/737 issued by Anyim Pius Anyim, then secretary to the government of the federation, had directed that a “specimen indemnity clause” be inserted into all contracts and agreements entered into by FGN with foreign entities.
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This, he said, was “to provide additional protection to the Federal Government Nigeria and some of its separate legal entities such as the CBN, NNPC and NSIA whose assets may be liable to attachment in enforcement proceedings in foreign jurisdictions”.

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Ngozi Okonjo-Iweala, then minster of finance, had sought the legal opinion of Mohammed Bello Adoke, then attorney-general of the federation (AGF), on the put-call option agreement (PCOA) signed with Azura Power — which included the PRG.
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Adoke reminded the minister of the SGF circular on the need to indemnify the federal government and prevent its assets from becoming vulnerable in the event of default.

The PCOA was eventually signed without Adoke’s legal opinion which was necessary to activate the agreement.

However,it has been reported that when President Muhammadu Buhari assumed office in 2015, pressure was mounted on Abdullahi Yola, the then solicitor-general of the federation, by top presidency officials to give a favorable legal opinion.

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